December 11, 2006
Jeffersson City, Mo. — Attorney General Jay Nixon and the Attorneys General of 16 other states have reached a $14.5 million settlement with Chase Bank and Trilegiant Corporation to resolve allegations that the companies unlawfully deceived consumers into paying for membership programs that were supposed to provide discounts on car, home repair, shopping and other goods and services.
The settlement requires Chase and Trilegiant to pay $8,325,000 to all consumers in Missouri and the other 15 participating states as part of the assurance of voluntary compliance. This will be used to provide 100 percent restitution to any Missouri consumers who were billed for these membership programs and who file complaints in the next nine months. In addition, Chase and Trilegiant will pay $150,000 to Missouri's Merchandising Practices Revolving Fund to help fund future consumer fraud prosecutions.
Nixon says the settlement resolves the states' allegations that Chase and Trilegiant deliberately mislead consumers in the sale of membership clubs. The company sells memberships to 39 such clubs, each of which purports to provide its members with discounts and reduced prices on a variety of goods and services, such as travel services, car rentals, shopping and home improvement products.
Trilegiant's solicitations often included a check for a nominal amount of money, between $2 and $10, which consumers often thought were rebates or rewards. When consumers deposited or cashed the check, the consumer unknowingly agreed to pay for the membership program after the trial offer ended, according to the complaint. The solicitations were often included in the consumers' mortgage or credit card statements, the complaint alleged, or in mailings with Chase's logo on the envelope and letterhead. This tactic prevented consumers from realizing the solicitations were in fact sent by Trilegiant.
If consumers did not affirmatively cancel within the required time, Trilegiant automatically billed the membership fees to consumers' credit card or loan statement on either a monthly or yearly basis, depending on the particular membership program. Trilegiant then charged consumers repeatedly until they finally cancelled their membership. Many consumers belatedly discovered they had unwittingly purchased memberships in several different clubs, the complaint alleged.
"It's a rather familiar scam, as the company misleads consumers by providing unclear and inadequate information and then socks them with credit card charges the consumer never intended to agree to," Nixon said. "We are pleased with this agreement, which should put a halt to such practices."
Regarding Chase's role in the alleged unlawful business practices, Chase and Trilegiant entered into agreements under which Trilegiant gained access to Chase's customers for the purpose of marketing the membership programs. In soliciting Chase's customers, Trilegiant used Chase's name and Chase reviewed and approved marketing materials used by Trilegiant, according to the complaint.
Nixon says that, in addition to restitution, the settlement requires reforms of Trilegiant's and Chase's business practices. Future solicitations sent by Trilegiant, or any other company that solicits Chase customers in a similar manner, must clearly disclose all the terms of any "free trial," including when and how the customer will be billed for any membership, and how to cancel. They must also cease engaging in deceptive conduct in the marketing of membership programs, including identifying the solicitation as a "reward" or "rebate" offer, or that any check or other premium offered as part of a solicitation is anything other than a benefit or incentive for the purchase of a membership.
Those consumers believing that they are entitled to restitution should fill out a consumer complaint form, which is available at www.ago.mo.gov, and submit. Any consumer who does not have access to the Web, or would like a hard copy of the complaint form mailed to them, may contact the Attorney General's Office at 800-392-8222.